BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
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IN THE MATTER OF THE APPLICATION OF THE PROMULGATION AND ESTABLISHMENT OF FIELD RULES TO GOVERN OPERATIONS FOR THE CODELL AND NIOBRARA FORMATIONS, WATTENBERG FIELD, WELD COUNTY, COLORADO |
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CAUSE NO. 407
DOCKET NO. 160300147
TYPE: POOLING
ORDER NO. 407-1679
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REPORT OF THE COMMISSION
The Commission heard this matter on April 18, 2016, at the Trinidad State Junior College, Pioneer Room in the Sullivan Center, 600 Prospect Street, Trinidad, Colorado, upon application for an order to pool all interests within an approximate 1,617-acre drilling and spacing unit established for Sections 14, 23, and 26, Township 5 North, Range 66 West, 6th P.M., and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., for the drilling of the Evans 25C-14-L Well, Evans 11N-14C-L Well, Evans 3N-14B-XR Well, Evans 29N-14A-XR Well, Evans 29C-14-XR Well, Evans 4N-14B-XR Well, Evans 4N-14A-XR Well, Evans 4C-14-XR Well, Evans 30N-14B-XR Well, Evans 4N-14C-XR Well, Evans 9C-14-L Well, Evans 9N-14C-L Well, Evans 24N-14B-L Well, Evans 24N-14A-L Well, Evans 10N-14A-L Well, Evans 24C-14-L Well, Evans 24N-14C-L Well, Evans 10N-14B-L Well, Evans 10N-14A-L Well, Evans 10N-14C-L Well, Evans 10C-14-L Well, and Evans 25N-14B-L Well, for the development and operation of the Codell and Niobrara Formations.
FINDINGS
The Commission finds as follows:
1. Synergy Resources Corporation (“Synergy” or “Applicant”), as applicant herein, is an interested party in the subject matter of the above-referenced hearing.
2. Due notice of the time, place and purpose of the hearing has been given in all respects as required by law.
3. The Commission has jurisdiction over the subject matter embraced in said Notice, and of the parties interested therein, and jurisdiction to promulgate the hereinafter prescribed order pursuant to the Oil and Gas Conservation Act.
4. On April 27, 1998, the Commission adopted Rule 318A, the Greater Wattenberg Area Special Well Location, Spacing and Unit Designation Rule. Sections 14, 23, and 26, Township 5 North, Range 66 West, 6th P.M. are subject to this Rule for the Codell and Niobrara Formations.
5. On February 19, 1992 (amended August 20, 1993), the Commission entered Order No. 407-87 which, among other things, established 80-acre drilling and spacing units for the production of oil, gas and associated hydrocarbons from the Codell-Niobrara Formations, the Codell Formation, and the Niobrara Formation underlying certain lands, including the Application Lands, with the permitted well locations in accordance with the provisions of Order No. 407-1.
6. On September 14, 2015, the Commission entered Order No. 407-1452 which established an approximate 1280-acre drilling and spacing unit for Sections 14, 23, and 26, Township 5 North, Range 66 West, 6th P.M., and approved up to 18 horizontal wells within the unit, for the production of oil, gas and associated hydrocarbons from the Niobrara and Codell Formations, with the productive interval of the any wellbore will be no closer than 460 feet from the unit boundaries, no closer than 150 feet from the productive interval of any other wellbore located in such unit, unless an exception is granted by the Director.
7. On March 7, 2016, the Commission approved Order No. 407-1666 which vacated an approximate 1280-acre drilling and spacing unit for Sections 14, 23, and 26, Township 5 North, Range 66 West, 6th P.M., and established an approximate 1617-acre drilling and spacing unit for certain portions of Sections 14, 23, and 26, Township 5 North, Range 66 West, 6th P.M. and approved up to 22 horizontal wells within the unit, for the production of oil, gas and associated hydrocarbons from the Niobrara and Codell Formations, with the productive interval of the any wellbore will be no closer than 460 feet from the unit boundaries, no closer than 150 feet from the productive interval of any other wellbore located in such unit, unless an exception is granted by the Director.
8. On January 7, 2016 (amended January 28, 2016), Synergy, by its attorneys, filed with the Commission pursuant to §34-60-116, C.R.S., a verified application (“Application”) for an order to pool all interests within an approximate 1,617-acre drilling and spacing unit for the below described lands (“Application Lands”) for the development and operation of the Codell and Niobrara Formations, effective as of the earlier of the date of the Application or the date that the costs specified in §34-60-116(7)(b), C.R.S., are first incurred for the drilling of the Evans 25C-14-L Well, Evans 11N-14C-L Well, Evans 3N-14B-XR Well, Evans 29N-14A-XR Well, Evans 29C-14-XR Well, Evans 4N-14B-XR Well, Evans 4N-14A-XR Well, Evans 4C-14-XR Well, Evans 30N-14B-XR Well, Evans 4N-14C-XR Well, Evans 9C-14-L Well, Evans 9N-14C-L Well, Evans 24N-14B-L Well, Evans 24N-14A-L Well, Evans 10N-14A-L Well, Evans 24C-14-L Well, Evans 24N-14C-L Well, Evans 10N-14B-L Well, Evans 10N-14A-L Well, Evans 10N-14C-L Well, Evans 10C-14-L Well, and Evans 25N-14B-L Well, for the development and operation of the Codell and Niobrara Formations. (“Wells”):
Township 5 North, Range 66 West, 6th P.M.
Section 14: S½; NW¼
Section 23: All
Section 26: N½
9. On February 19, 2016, Kerr-McGee Oil & Gas Onshore LP (“Kerr-McGee”) filed a protest to the Application. The protest was withdrawn on March 28, 2016.
10. On March 28, 2016 (supplemented April 7, 2016), Synergy, by its attorneys, filed with the Commission a written request to approve the Application based on the merits of the verified Application and the supporting exhibits. Sworn written testimony and exhibits were submitted in support of the Application.
11. On April 4, 2016, IA Greeley Centerplace, L.L.C. (“IA Greeley”), by their attorneys, submitted a protest to the Application.
12. On April 7, 2016, Synergy supplemented its 511 testimony to state that it will not be applying cost recovery provisions against IA Greeley at this time.
13. On April 8, 2016, a prehearing conference was held by telephone.
14. On April 11, 2016, the parties resolved the protest whereby (i) IA Greeley would withdraw its protest to the Application and the Application will proceed on the Commission’s consent agenda, (ii) Synergy would allow IA Greeley until May 11, 2016 to make its election to participate in the Well, and (iii) if IA Greeley does not timely elect to participate in the Well, then Synergy may apply the cost recovery provisions of §34-60-116(7), C.R.S., to IA Greeley’s interest.
14. Land testimony and exhibits submitted in support of the Application by David Baumbach, Senior Landman for Synergy, showed that all non-consenting interest owners were notified of the Application and received an Authority for Expenditure ("AFE") and offer to participate in the Wells. Further testimony concluded that the AFE sent by the Applicant to the interest owners was a fair and reasonable estimate of the costs of the proposed drilling operation and was received at least 35 days prior to the April 18, 2016 hearing date.
15. Land testimony showed the Applicant complied with the requirements of Rule 530, and is entitled to the cost recovery provisions pursuant to §34-60-116(7), C.R.S., for the Evans 25C-14-L Well, Evans 11N-14C-L Well, Evans 3N-14B-XR Well, Evans 29N-14A-XR Well, Evans 29C-14-XR Well, Evans 4N-14B-XR Well, Evans 4N-14A-XR Well, Evans 4C-14-XR Well, Evans 30N-14B-XR Well, Evans 4N-14C-XR Well, Evans 9C-14-L Well, Evans 9N-14C-L Well, Evans 24N-14B-L Well, Evans 24N-14A-L Well, Evans 10N-14A-L Well, Evans 24C-14-L Well, Evans 24N-14C-L Well, Evans 10N-14B-L Well, Evans 10N-14A-L Well, Evans 10N-14C-L Well, Evans 10C-14-L Well, and Evans 25N-14B-L Well, but did not provide testimony for any subsequent wells.
16. The above-referenced testimony and exhibits show that granting the Application will allow more efficient reservoir drainage, will prevent waste, will assure a greater ultimate recovery of hydrocarbons, and will not violate correlative rights.
17. Synergy agreed to be bound by oral order of the Commission.
18. Based on the facts stated in the verified Application, having resolved all protests, and based on the Hearing Officer review of the Application under Rule 511., the Commission should enter an order to pool all interests within an approximate 1,617-acre drilling and spacing unit established for Sections 14, 23, and 26, Township 5 North, Range 66 West, 6th P.M., and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., for the drilling of the Evans 25C-14-L Well, Evans 11N-14C-L Well, Evans 3N-14B-XR Well, Evans 29N-14A-XR Well, Evans 29C-14-XR Well, Evans 4N-14B-XR Well, Evans 4N-14A-XR Well, Evans 4C-14-XR Well, Evans 30N-14B-XR Well, Evans 4N-14C-XR Well, Evans 9C-14-L Well, Evans 9N-14C-L Well, Evans 24N-14B-L Well, Evans 24N-14A-L Well, Evans 10N-14A-L Well, Evans 24C-14-L Well, Evans 24N-14C-L Well, Evans 10N-14B-L Well, Evans 10N-14A-L Well, Evans 10N-14C-L Well, Evans 10C-14-L Well, and Evans 25N-14B-L Well, for the development and operation of the Codell and Niobrara Formations.
ORDER
IT IS HEREBY ORDERED:
1. Pursuant to the provisions of §34-60-116, C.R.S., as amended, of the Oil and Gas Conservation Act, any nonconsenting interests in the approximate 1617-acre drilling and spacing unit established for the below-described lands, are hereby pooled, for the development and operation of the Codell and Niobrara Formations, effective as of the date of the Application or the date that costs were first incurred, for the drilling of the Evans 25C-14-L Well, Evans 11N-14C-L Well, Evans 3N-14B-XR Well, Evans 29N-14A-XR Well, Evans 29C-14-XR Well, Evans 4N-14B-XR Well, Evans 4N-14A-XR Well, Evans 4C-14-XR Well, Evans 30N-14B-XR Well, Evans 4N-14C-XR Well, Evans 9C-14-L Well, Evans 9N-14C-L Well, Evans 24N-14B-L Well, Evans 24N-14A-L Well, Evans 10N-14A-L Well, Evans 24C-14-L Well, Evans 24N-14C-L Well, Evans 10N-14B-L Well, Evans 10N-14A-L Well, Evans 10N-14C-L Well, Evans 10C-14-L Well, and Evans 25N-14B-L Well, for the development and operation of the Codell and Niobrara Formations:
Township 5 North, Range 66 West, 6th P.M.
Section 14: S½; NW¼
Section 23: All
Section 26: N½
2. The production obtained from the drilling and spacing unit shall be allocated to each owner in the unit on the basis of the proportion that the number of acres in such tract bears to the total number of mineral acres within the drilling and spacing unit; each owner of an interest in the drilling and spacing unit shall be entitled to receive its share of the production of each of the Wells located on the drilling and spacing unit applicable to its interest in the drilling and spacing unit.
3. The nonconsenting leased (working interest) owners must reimburse the consenting working interest owners for their share of the costs and risks of drilling and operating each Well (including penalties as provided by §34-60-116(7)(b), C.R.S.) out of production from the drilling and spacing unit representing the cost-bearing interests of the nonconsenting working interest owners as provided by §34-60-116(7)(a), C.R.S.
4. Any unleased owners are hereby deemed to have elected not to participate and shall therefore be deemed to be nonconsenting as to each Well and be subject to the penalties as provided for by §34-60-116(7), C.R.S. Any party seeking the cost recovery provisions of §34-60-116(7), C.R.S., shall first comply with subsection (d) for any subsequent well(s).
5. Each nonconsenting unleased owner within the drilling and spacing unit shall be treated as the owner of the landowner's royalty to the extent of 12.5% of its record title interest, whatever that interest may be, until such time as the consenting owners recover, only out of each nonconsenting owner's proportionate 87.5% share of production, the costs specified in §34-60-116(7)(b), C.R.S. as amended. After recovery of such costs, each unleased nonconsenting mineral owner shall then own its proportionate 8/8ths share of the Well, surface facilities and production, and then be liable for its proportionate share of further costs incurred in connection with the Well as if it had originally agreed to the drilling.
6. The operator of the well drilled on the above-described drilling and spacing unit shall furnish the nonconsenting owners with a monthly statement of all costs incurred, together with the quantity of oil and gas produced, and the amount of proceeds realized from the sale of production during the preceding month.
7. Nothing in this order is intended to conflict with §34-60-116, C.R.S., as amended. Any conflict that may arise shall be resolved in favor of the statute.
8. IA Greeley will have up to and including May 11, 2016, within which to advise Synergy in writing if it intends to participate in the Well. Should IA Greeley fail to advise Synergy in writing of its intention to participate in the Well by May 11, 2016, or elects not to participate in the Well in writing before or May 11, 2016, IA Greeley will be deemed to be nonconsenting as to the Well and be subject to the penalties as provided for by §34-60-116(7), C.R.S.
1. The provisions contained in the above order shall become effective immediately.
2. The Commission expressly reserves its right, after notice and hearing, to alter, amend or repeal any and/or all of the above orders.
3. Under the State Administrative Procedure Act, the Commission considers this Order to be final agency action for purposes of judicial review within 35 days after the date this Order is mailed by the Commission.
4. An application for reconsideration by the Commission of this Order is not required prior to the filing for judicial review.
ENTERED this 3rd day of May, 2016, as of April 18, 2016.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Julie Murphy, Secretary